Retail giants enter the booze business in Minnesota

Anyone who walks into a Total Wine and More like the one in Roseville will enter a store that might seem as big as a football field. The Walmart of wines, as some call the chain, stocks up to 2,500 beers, 3,000 spirits and 8,500 wines in stores that number more than 100 nationwide.

When the Roseville store opened in March, it marked the Maryland based company's first foray into Minnesota.

"Any time you have a large store like this, they can offer, I think, better prices on their product because they buy in such bulk," said Jane Matheson, who drove more than 30 minutes to shop at the store because she likes its wines and prices.

Minnesota's small liquor stores have long defended their turf, fighting to limit how and when booze is sold. But those merchants are facing increasingly intense competition. Total Wine and Target are the latest rivals aiming to grab a piece of the state's alcohol sales, following in the steps of many grocery chains and big discount retailers.

Total Wine is already making progress. At the Roseville store, customers come from far and wide, store manager Derek Hopper said.

"We've had people from the northern border, by Canada, come down and do a 14-case wine run," he said. "We've had people driving over from Wisconsin."

One person you will not find at Total Wine is Steve Burwell, who owns Fairview Wine & Spirits, about a third of a mile away.

Burwell sees Total Wine as a cut-throat competitor that will price popular products so low that small shops like his can't compete.

"I don't know where we're going to be next June," he said. "I hope that we're still here. It's tough. There will be stores I'm absolutely certain that will close."

With so many big box stores entering the market, Burwell wonders if small neighborhood liquor stores will fade away as many grocery and hardware stores and pharmacies have.

Big retailers see alcohol as quick way to attract more customers and boost sales.

Last year, Walmart reportedly embarked on a campaign to double alcohol sales by 2016.

Minnesota doesn't allow most retailers to sell alcohol, with the exception of 3.2 beer. State law also requires liquor stores to be physically separate from other businesses.

That means grocers and other retailers cannot sell booze in their main stores. To sell alcohol, they must set up separate stores. And they have.

Grocers and general merchandise retailers in Minnesota now sell alcohol at about 100 stores in total. The real stuff, not just low-alcohol 3.2 beer. Consumers can buy wine, real beer or hard liquor at Trader Joe's, Byerly's, Cub Foods, Costco, Sam's Club, Walmart and other chain stores that have obtained liquor licenses.

Survey of alcohol prices, Sept. 5, 2014:

But it's Total Wine that has really drawn the wrath of Burrell and fellow members of the Minnesota Licensed Beverage Association, perhaps because they consider the national powerhouse a greater threat than big regional players.

The association tried to block Total Wine's entry into the Minnesota market, arguing that communities have too many liquor outlets and raising questions about Total's business practices and record in other states.

David Trone, president of Total Wine, said his company has never run into as intense opposition as it has in Minnesota.

"When it comes to the competitors, there's been virtually no Minnesota nice," he said. "And they have fought us tooth and nail. They just don't want to compete. So, they're trying to use government to block competition."

That didn't work in Roseville. Now Woodbury and Burnsville have granted licenses to Total Wine, too. In Bloomington, where the licensing process has dragged on since last November, Total Wine aims to obtain a license this fall.

Total Wines executives argue that the store primarily appeals to people buying in volume for weddings, reunions and other special events. Trone said that leaves the convenience market to small liquor stores.

The new entrants also present a challenge to big local liquor retailers, such as Morelli's in St. Paul.

"People drive a considerable distance, thank God, to come to see us," owner Jim Morelli said. "And hopefully we can keep that happening. But it will be challenging for everyone. There's just more stores, and more stores with regional or national prominence."

Morelli sees customers using their smart phones to compare prices with those at Total Wine. Customers also tell him Walmart stores vow to match his prices -- which he keeps low by taking only cash or checks.

Target also wants a taste of Minnesota liquor sales

Next month the Minneapolis-based retailer plans to start selling a full selection of wine, beer and hard liquor at its store in Otsego. Target officials declined an interview request. They won't say if the company will open more liquor stores in the state. But nationwide, the retailer sells alcohol at about three quarters of its some 1,800 stores.

Ted Farrell, the president of Haskell's, has his eye on Target and its 76 Minnesota stores.

"If they're going to get into that business, they'll probably do it quite well," he said.

Farrell says Haskell's won't back off its policy of matching competitors' prices.

"We'll just have to sharpen our pencil," he said. "Good competition makes you a better retailer."

Customers who shop at Total Wine or the liquor stores run by other major merchants may not abandon local stores altogether. Matheson still appreciates the store a few minutes from her house.

"They carry some decent wines and I can get it in two minutes rather than driving 35 minutes to this store," she said.

Whether those small stores die out is an open question, but there's little doubt that their hold on state's liquor market is slipping.